Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, March 19, 1990 TAG: 9003162938
SECTION: BUSINESS PAGE: B6 EDITION: METRO
SOURCE: Mag Poff
DATELINE: LENGTH: Medium
I want to buy a bank stock. What do you think of Chemical Bank of New York?
Do you consider this a balanced portfolio?
A: Your portfolio has balance, according to W. Jeffrey Roberts, manager of the Roanoke office of Branch Cabell. But it emphasizes unusually high yields which, as you probably realize, means you have some problem investments.
As for the bank, Donaldson, Lufkin & Jenrette in a recent newsletter called Chemical bank stock "unattractive" and a "sell" despite its 10 percent yield.
Roberts agreed with that assessment. He said Chemical, after recovering somewhat from bad loans to Third World nations, got itself involved in lending to Drexel Burnham Lambert, Campeau and other leveraged ventures.
He would avoid all New York money center banks.
The most attractive bank stocks are regionals in the southeast. He said those in Virginia - notably Dominion, Sovran, Crestar, Signet and First Virginia - are sound banks with favorable stock prices.
If you want a bigger bank, Roberts said, try Florida's SunTrust.
Some of those bank stocks are also plays on a possible merger. Nobody would want to take over Chemical with its problems, he said.
Among your utility stocks, Dominion Resources (parent of Virginia Power) and Carolina Power are solid companies. Ohio Edison is a "middle of the road utility."
Illinois Power is speculative and a cause for concern, Roberts said. Tied up in controversy over financing of nuclear power, it no longer pays dividends. He would sell and put the money into Dominion Resources.
General Motors and Texaco are good companies that balance your portfolio.
RJR Holding, however, has been "shredded" along with the rest of the junk bond market. Roberts would get out of it fast.
Mesa Limited Partnership is a creation of corporate raider T. Boone Pickens and highly speculative.
Roberts said Mesa earned 15 cents a share last year but paid out 10 times that much with a dividend of $1.50 a share. At its current depressed price of about $7 a share, the yield is 21 percent.
Those figures should warn you that something is seriously wrong with the stock.
Roberts would sell RJR Holding and Mesa on the theory that you buy winners and prune losers. He suggested two alternatives.
One is Philip Morris, a food company that owns Kraft and General Foods among other respected names.
Another is Hanson PLC, which invests in a broad range of interests including food, tobacco, coal and gold. The stock is also a play on the European market because Hanson is headquartered in London.
Despite its global outlook, Roberts said, Hanson PLC has a local tie. It owns MW Windows in Rocky Mount and Grove Worldwide, which will open a plant in Salem.
by CNB